1. Energy Policy and Air Quality Joseph Hower, P.E., DEE Managing Principal ENVIRON International Corporation Los Angeles, California

2. ENERGY POLICY and AIR QUALITY  Air quality issues have historically had little impact on energy policy  Recent events have changed that dramatically  PM 2.5 and climate change will drive this much faster

3. ENERGY POLICY and AIR QUALITY  Energy Policies affect all combustion sources of air pollution, both mobile and stationary

4. ENERGY POLICY and AIR QUALITY Combustion Sources emit: –Primary PM, comprised mainly of elemental and organic carbon that forms from the carbon in fuel –Precursor gases that are the main components of secondary PM: SOx which can form sulfates NOx which can form nitrates (To a lesser extent ammonia, commonly a by-product of NOx control equipment, which can neutralize both nitrate and sulfate to form salts in the solid phase)

5. Energy and Air Policy Interplay  Air Quality is directly affected by Energy Policy,  Air Quality considerations historically had less influence on Energy Policy than other economic and political factors such as: –energy efficiency –domestic and foreign fuel availability, and –foreign policy  Air policies and the need for emissions controls increasingly affect economics of using certain fuels to generate power  NRDC has a formal program to oppose every new coal- fired power plant  California’s energy policy increasingly driven by AB32 and diesel exhaust cancer concerns

6. PM 2.5 Policies and the Energy Industry  New Source Review and PSD: Goal to reduce major stationary sources of pollutants to meet National and State AAQS. –Limited direct focus on energy  Utilities and other combustion sources are significant sources of primary PM 2.5 and secondary PM precursors.  NSR program not yet developed for PM 2.5  Regional Haze: Goal to improve visibility in Parks and Wilderness areas. Major source of degraded visibility is long range transport of PM and secondary PM from point sources

7. California Policies/History with Energy and Air Quality  Energy shortages in the 70s’s –Primary concern was energy, little thought of environmental issues  2000/2001 energy shortage – Governor Davis Executive Orders to expedite Power Plant Permits, in 30 days  Power crisis caused many facilities to run diesel generators  Power crisis and lack of planning led to RECLAIM crisis in the South Coast AQMD  Affected non-power sector RECLAIM facilities  Some power plants curtailed operations to avoid air permit and/or RECLAIM violations, then were prosecuted for price manipulation

8. California Policies/History with Energy and Air Quality (cont)  AB32 – should lead to energy efficiency gains through reduced fuel use and thus lower levels of emissions. PM 2.5 impact of switching to renewable fuels is unclear  ARB’s Zero-Emissions Vehicle mandate: EV’s need electricity. Mandate may have led to more hybrids and Partial ZEV (PZEVs), which lowers NOx emissions per vehicle and thus likely less nitrates  Environmental issues starting to drive energy conservation in other ways –LEED buildings –Driving vehicle fuel economy improvements –Need more direct linkage between conservation and environmental

9. Natural Gas?  Natural gas often viewed as clean-burning but…  Burning natural gas still produces enough PM 10 that offsets are sometimes needed, which are often difficult to obtain –Drove amendments to Rule 1309.1  SB 1368 Requires that new base load generation generate no more GHG emissions than a gas-fired combined cycle plant, likely drive more such plants, both in and out of CA  Switching to natural gas is a strategy to reduce diesel generated PM from mobile sources – but when accounting for leaks and unburned methane, this switch could result in higher GHG emissions compared to diesel due to the methane emitted

10. Natural Gas? (cont)  Natural gas demand growing and domestic supply shrinking  Prices rising, affecting consumers directly and indirectly  LNG terminal development has been difficult –SES turned down by City of Long Beach, court –Other proposed facilities facing fierce opposition –SCAQMD concerned about “hot gas”

11. Energy Policy Act of 2005  Preemption of State Authority over Liquefied Natural Gas (LNG) Terminals  Limitation on State Authority to Require Clean Fuels for Motor Vehicles  Section 1541 effectively bars a state from adopting a new requirement for cleaner burning fuel unless: –(1) the fuel would not increase the total number of fuel formulations in existence in 2004 and –(2) use of the same fuel is already required elsewhere in that petroleum distribution district. In practice, this would block state requirements for any new and innovative type of clean burning fuels.  Section 1541 allows EPA to suspend existing state clean fuel requirements under “extreme and unusual fuel and fuel additive supply circumstances.”  Some tax credits for biofuels and other technologies http://oversight.house.gov/bills.asp?ID=35http://oversight.house.gov/bills.asp?ID=35 House Oversight Committee

12. Renewable Fuels  Many pushing use of renewable or biofuels  Subsidies and requirements for ethanol  Initial assumption is that biofuels are carbon neutral because the carbon release from combustion was absorbed during the plant growth cycle –Ignores what would have happened without fuel crops –Ignores refining emissions, which can also be significant –Land clearing operations can release huge amounts of CO 2  Concerns that biofuels are driving up food prices

13. Contact Information Joseph Hower, PE, DEE Managing Principal ENVIRON International Corporation 707 Wilshire Blvd. Suite 4950 Los Angeles, CA 90017 (213) 943-6319 (949) 798-3646 jhower@environcorp.com Also see www.environcorp.com